[Opinion] Let’s embrace the spotlight and talk about trust

The FMA's Churn report challenge the fundamentals of the way our industry operate, FSC chief executive Richard Klipin says. But it should also be seen as a rallying call to all involved with life insurance.

The recent FMA report on replacement business and their respective findings has highlighted some real challenges within the adviser channel and has sparked plenty of debate. The FSC welcomes constructive dialogue and debate in regards to areas of the industry that are undergoing regulatory change

While there are a diversity of views and business models, it’s easy on an issue like this to fall back on hard positions in defence of our particular perspective. We all need to consider the issues raised in the report and what we can collectively do to retain and build trust in the industry.

Questions have been raised about whether the actions of few implicate the whole industry and if this is just the tip of the iceberg. I firmly believe this is not the case. The fundamentals of our industry are sound, and the relatively small sample of advisers that the FMA report relied on are not indicative of the thousands of financial advisers who every day do great work for their clients.

The industry also has an obligation to raise standards, build trust and improve outcomes. As such, the FSC membership has been hard at work developing the FSC Code of Conduct . These self regulatory initiatives are designed to complement the law and guidance from MBIE and the FMA

Nonetheless the findings of the report do raise challenging issues that as an industry we need to be direct about and have a good honest discussion about.

Have we got the settings right for the interplay between remuneration and advice?

Do the ethics and standards in this area need improving?

And perhaps most important of all are we completely confident that the current settings are driving the best possible outcomes for clients?

In having these conversations we can’t take anything for granted. We need to ask the blunt questions and be prepared to challenge even the fundamentals of the way our industry operates. This is also a debate that needs to involve all of us – product providers, the FMA, industry bodies, advisers and distributors – we all need to be focused on the role of trust and doing the right thing for New Zealanders.

What we do as financial service professionals is driven by trust. Trust to do the right thing, trust to deliver outcomes, trust to give the right advice, trust that our products and services serve consumers, and trust that advisers are fairly remunerated for the work that is done.

The FMA report raises questions about whether we’re doing enough to maintain that trust. Even if the fundamentals are sound it’s important that we use the opportunity of the report being released to act as rallying call for the industry to see what we can do to improve the status quo.

In the case of the specific findings, the FMA has challenged the industry to do better in understanding and resolving the inherent tension (sometimes real and sometimes perceived) between consumer outcomes, quality advice, adviser conduct and the use of incentives.

The interplay between adviser conduct and behaviour, incentives and client outcomes is a complex one but we must take on this challenge

It is only by doing this that we can ensure that as an industry we keep playing a key role in helping New Zealanders get advice, protect the people they love, manage risk, and sleep easier at night.

With the current changes proposed through the Financial Services Legislation Amendment Bill, the Financial Advice Code Working Group, and the FSC Code of Conduct we are on the cusp of major change. The FSC strongly supports these changes and we are and will continue to take a leadership role in driving the industry in its journey of constant improvement.

Trust is hard won but easily lost. We have a great industry in New Zealand that we can be proud of but we need to ensure that we do not take it for granted. We cannot rest on our laurels. As an industry let’s respond to the FMA report constructively and show why we deserve the trust of the public and the regulators.

Comments from our readers

On 9 April 2018 at 2:56 pm Do what is right said:

Richard comments about how the FMA has challenged our industry to do better. I would like to challenge the FMA to understand the industry that they are regulating better. We all know that we are a better industry than they give us credit for.

We also know that whenever FMA go to media with negative aspects, it becomes a story of significance. If FMA really understand this industry, go to the media with the positive aspects of dealing with a quality adviser.

FMA should also go to the media and make it clear, that banks are not generally qualified to give financial advice and the advice they do give, is of self interest. Balance of understanding would be a fine thing rather than the current 'beat up the adviser' angle which appears fashionable for the FMA.

On 11 April 2018 at 1:28 pm Paul J Burns said:

"Do What is right" comments are on the money. Which is why I'm becoming increasingly incredulous and disdainful towards the "News" media. One just has to look at Fairfax/Stuff's cozying up to NIB (with "DoneHealth"), because they need to bolster/diversify their floundering journalism revenues. How can I trust the media when they hop into bed with larger corporations?

On 12 April 2018 at 3:11 pm Mike Naylor said:

Paul - you should have realised by now that the tech revolution going on in the traditional media has devastated their ability and willingness to fund good journalism. The 'good old days' are dead. And bad news always sells.

It's up to the industry as a whole to push good news stories. Thankfully the bankruptcy of trad media mean that they are increasingly willing to accept already prepared copy.

The industry is still at the stage where the public is sceptical and the bad 2% can outweigh all the good the great 98% do. It will take time, and it will take the majority of the chattering middle classes to have good experiences with their adviser before public trust is established.